In many cases, the end of the year gives you time to step back and take stock of the last 12 months. This is when many of us take a hard look at what worked and what did not, complete performance reviews, and formulate plans for the coming year. For me, it is all of those things plus a time when I u...

SAN FRANCISCO, Nov. 16, 2012 /PRNewswire/ -- Virgin America today reports its financial results for the third quarter of 2012. The airline achieved a $15.8 million operating profit for the quarter, resulting in a four percent operating margin. Despite the continued dual financial pressure of high fuel prices and Virgin America's industry-leading capacity growth, the airline reported an operating profit for the quarter, improved unit costs, and an increase in average fares. For the third quarter, the carrier reported a 24 percent improvement year-over-year in earnings before interest, taxes, depreciation and amortization, and aircraft rental expense (EBITDAR). Year-to-date, the airline reported a record high EBITDAR of $135.7 million, an improvement of 23 percent year-over-year. Cost per available seat mile excluding fuel (ex-fuel CASM) decreased year-over-year by three percent in the three months ended September 30, 2012. A privately-held company, the carrier is additionally forecasting an operating profit for the fourth quarter of 2012.

From the third quarter of 2010 through the third quarter of 2012, the airline increased available seat miles (ASMs) by 73 percent, significantly outpacing the industry ASM growth average of 0.4 percent. Virgin America's rate of growth was necessary to establish the airline's core network and to achieve economies of scale. However, as the airline absorbed the tail-end of this growth cycle, its entry into new markets created margin pressure which offset gains in more mature markets. The airline's core markets (those operated more than 24 months) achieved an operating margin of eight percent in the third quarter and were profitable year-to-date. This strong performance in mature markets was offset by weaker performance in newer destinations added during the airline's rapid two-year growth phase. This phase of accelerated growth is now largely complete, as the airline plans to take delivery of just one additional aircraft in 2013—and today announces a deferred growth plan with respect to aircraft on order. This reduction in growth will allow the carrier to continue to improve profitability, as new markets develop to match the performance of its core established network.

"Our major challenge has been managing significant growth into new markets during both a recession and an environment of historic oil price highs," said David Cush, President and CEO of Virgin America. "All airlines have faced these same industry challenges, but none have done so as a brand new carrier fueling 73 percent capacity growth in the past 24 months. We've consistently seen that markets we operate in longer than 12 to 18 months mature into profitability, demonstrating that once people fly with us, they stay with us – especially higher-yielding business travelers."

Virgin America announces today that it has reached an agreement to modify its Airbus aircraft order. Under the revised agreement, Virgin America's order for current engine option A320 aircraft will be reduced from 30 positions to ten, with delivery of those aircraft occurring in 2015 and 2016. In addition, the airline announces it will defer its 30 Airbus A320neo positions to new delivery dates in 2020 through 2022. Average ASM growth will decelerate from the 28 percent annual growth rate the airline has driven over the past three years, to mid single-digit annual ASM growth over the next several years. The Company has taken delivery of 24 aircraft since the first quarter of 2010 – growing to a fleet of 52 Airbus A320 Family aircraft.

"The low operating costs, cabin comfort and fuel efficient design of our Airbus A320 Family fleet has provided an excellent platform for our growth to date and we remain confident that it is the right aircraft for our future plans. With restructured growth, an unrivaled product and growing loyalty among business travelers, we're in a position to deliver strong performance in 2013 and beyond," added Cush. "With slowed growth, we will be able to focus on maximizing the value of our network, instead of managing additional capacity. As we enter this period of measured growth, we expect the investment in our network to continue to provide improved financial results."

In the 12 months ending in September 2012, Virgin America launched new service to Puerto Vallarta, Palm Springs, Philadelphia, Portland and Washington DC's Reagan National Airport. Since its 2007 launch, the airline has created 2,600 new jobs, expanded to 19 airport destinations, signed up 2.6 million Elevate® members and swept the reader-based travel awards, including "Best Domestic Airline" in Condé Nast Traveler's Readers' Choice Awards and Travel + Leisure's World's Best Awards. As one of the few expanding U.S. airlines, Virgin America grew by 495 teammates since the third quarter of 2011.

Top Line Third Quarter Reporting Highlights:

Operating results: The airline reported an operating profit of $15.8 million in the third quarter.

Average Fare: Average fare increased 3 percent year-over year.

Load Factor: Revenue passenger miles increased 24 percent year-over-year on a 31 percent increase in capacity, resulting in a third quarter load factor of 80 percent– a five point load factor decrease for the quarter year-over-year.

Top line progress: Operating revenue for the third quarter grew by 27 percent year-over-year to $368 million on a 31 percent increase in Available Seat Miles (ASMs), at a time when most of the industry reported flat capacity.

Cost control: Operating expense per available seat mile excluding fuel (ex-fuel CASM) decreased by 3 percent in the quarter year-over-year, reflecting the economies of scale from the Company's growth over the past year.

Cash: The airline ended the quarter with $75 million in unrestricted cash.

This year, Virgin America reached the threshold to be included in operational reports published by the U.S. Department of Transportation (DOT) and as such began reporting its on-time performance, baggage handling and other key operational statistics to the DOT monthly. For the third quarter of 2012, Virgin America achieved an 83.3 percent cumulative on-time performance, placing the carrier fifth for on-time performance among all reporting major U.S. carriers for the quarter. The airline's baggage handling rate for the first nine months of 2012 was 0.76 mishandled baggage reports per 1000 guests, which placed it first among all reporting U.S. carriers for baggage reliability.

Although a privately held company, Virgin America is announcing these earnings results in advance of the DOT quarterly reports.

Virgin America Inc.

Unaudited Statements of Operations

For the Three and Nine Months Ending September 30, 2012 and 2011

(in thousands)

Three months ended September 30

PercentChange

Nine months ended September 30

Percent

Change

2012

2011

%

2012

2011

%

OPERATING REVENUES

Guest

$ 337,098

$ 266,842

26.3

$ 897,416

$ 697,169

28.7

Other

30,946

23,794

30.1

85,005

63,141

34.6

Total operating revenues

368,044

290,636

26.6

982,421

760,310

29.2

OPERATING EXPENSES

Aircraft fuel

142,870

110,143

(29.7)

406,696

306,787

(32.6)

Aircraft rent

56,104

42,405

(32.3)

164,351

122,632

(34.0)

Wages, salaries and related costs

43,823

35,323

(24.1)

129,576

101,562

(27.6)

Aircraft maintenance

15,742

14,713

(7.0)

53,137

40,936

(29.8)

Landing fees and other rent

29,494

22,530

(30.9)

82,308

63,454

(29.7)

Sales and marketing

28,309

20,647

(37.1)

81,050

61,561

(31.7)

Guest services and supplies

13,365

11,050

(21.0)

37,668

31,019

(21.4)

Depreciation

2,953

1,953

(51.2)

8,225

6,743

(22.0)

Other operating expenses

19,554

15,646

(25.0)

56,247

44,881

(25.3)

Total operating expenses

352,214

274,410

(28.4)

1,019,258

779,575

(30.7)

Operating income/(loss)

15,830

16,226

(2.4)

(36,837)

(19,265)

91.2

Operating margin

4.3%

5.6%

(1.3) pts

(3.7%)

(2.5%)

(1.2) pts

Interest expense, net

28,458

19,528

45.7

83,557

50,311

66.1

Net loss

$ (12,628)

$ (3,302)

282.4

$ (120,394)

$ (69,576)

73.0

EBITDAR

$ 74,887

$ 60,584

23.6

$ 135,739

$ 110,110

23.3

Comparative Operating Statistics

Three months ended September 30

Percent Change

Nine months ended September 30

Percent Change

2012

2011

%

2012

2011

%

Available seat miles (ASMs)(millions)

3,375

2,576

31.0

9,424

7,198

30.9

Departures

15,152

11,693

29.6

42,321

32,651

29.6

Average stage length (miles)

1,571

1,566

0.3

1,573

1,573

-

Aircraft in service (average)

52

39

33.3

50

37

35.1

Fleet utilization

12.1

12.7

(4.7)

12.4

12.7

(2.4)

Guests

1,688,744

1,370,678

23.2

4,717,908

3,656,615

29.0

Average fare

$199.62

$194.68

2.5

$190.21

$190.66

(0.2)

Yield per passenger mile (cents)

12.55¢

12.30¢

2.0

11.91¢

11.93¢

(0.2)

Scheduled revenue passenger miles (millions)

2,687

2,170

23.8

7,533

5,846

28.9

Load factor

79.6%

84.2%

(4.6)

pts

79.9%

81.2%

(1.3)

pts

Guest revenue per available seat mile (cents)

9.99¢

10.36¢

(3.6)

9.52¢

9.69¢

(1.8)

Total revenue per available seat mile (cents)

10.91¢

11.28¢

(3.3)

10.42¢

10.56¢

(1.3)

Cost per available seat mile - CASM (cents)

10.44¢

10.65¢

(2.0)

10.82¢

10.83¢

(0.1)

Cost per ASM, excluding fuel (cents)

6.20¢

6.38¢

(2.8)

6.50¢

6.57¢

(1.1)

Fuel cost per gallon

$3.28

$3.25

0.9

$3.34

$3.25

2.8

Fuel gallons consumed (thousands)

43,587

33,911

28.5

121,765

94,441

28.9

Teammates (FTEs)

2,406

2,022

19.0

About Virgin America: Headquartered in California, Virgin America offers guests attractive fares and a host of innovative features aimed at reinventing air travel. In just over five years flying, Virgin America was named "Best Domestic Airline" in the CondéNast Traveler 2008, 2009, 2010, 2011 and 2012 'Readers' Choice' Awards and "Best Domestic Airline" in Travel + Leisure's 2008, 2009, 2010, 2011 and 2012 'World's Best' Awards. The airline's base of operations is San Francisco International Airport (SFO)'s sleek and sustainable new Terminal 2. The airline's new aircraft offer interactive in-flight entertainment systems and power outlets near every seat. Virgin America offers Gogo™ WiFi on every flight and hosts the largest in-flight entertainment library in the North American skies via the touch-screen Red™ platform. For more: www.virginamerica.com

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